By Susanna Lukacs, Policy Fellow at the Property Rights Alliance
Before June 1, 2023 Europe was wrought with different patent systems and courts within each member state of the EU. Each country had its own court to hear patent cases – applying its own procedural laws. Now, after many unsuccessful endeavors, the European Union’s Unified Patent Court (UPC) has come into effect with headquarters in Paris, and its court of appeals and registry in Luxembourg.
The UPC provides a unified set of substantive and procedural laws that streamlines patent litigation within the EU, allowing global patent portfolios to be obtained and enforced. This pioneering change in the international litigation arena shall provide inventors with a single patent that protects their inventions in multiple EU countries, where those patents can be also challenged and defended.
Until now, the European Union lacked a common appeals court to guarantee uniformness in the law, and each European country had its own court to address patent cases. In addition, some countries, like Germany, Austria, and Hungary have bifurcated systems and as a result infringement and validity are processed by different courts and dissimilarities between procedures among national courts often brought about inconsistent decisions. Overall, it may be boldly stated that the UPC has put an end to a backward system where “bundle patents” issued by the European Patent Office may only be enforced or revoked in national courts that often came with burdensome processes. “The Unitary Patent system will strengthen the EU’s innovation and competitiveness and complete the Single Market for patents. It will initially cover 17 Member States, representing around 80% of the EU’s GDP. Participation is open to further Member States in the future, ” claims the European Commission.
As of June 1, 2023 the UPC’s electronic Case Management System will allow cases to be lodged. For most businesses, the advantage of electing a Unitary Patent (a patent with a unitary effect) will be its cost efficiency. Saving on validation and renewal fees is a great benefit for innovative companies with broader patent portfolios, creating huge savings in the range of multiple thousands of euros, but also providing a more expansive coverage when protecting an invention. European Internal Market Commissioner, Thierry Breton claims:
“This will benefit all companies, and in particular SMEs. For instance, a Unitary Patent covering a territory of potentially up to 25 Member States will cost less than €5,000 in renewal fees over 10 years, instead of the current level of around €29,000. The Unitary Patent will also reduce the gap between the cost of patent protection in Europe compared with the US, Japan and other third countries.”
Knobbe Martens partners Dan Altman shares a similar view, having added that “companies might find a unitary patent more cost-effective if they plan to enforce it in four or more of the 17 countries currently participating in the UPC system.”
So, why are some opting out?
It is still a system not quite oiled in, and uncertainties might just plague it. For one, London having withdrawn its ratification of the Agreement on the Unified Patent Court in 2020 due to Brexit, left competencies which were originally allocated to the London seat of the UPC central division to be now divided between Munich and Paris. However, back in March 2023 it was reported that Milan would replace London, if it budged as regards leaving a considerable share of the London competencies to Munich and Paris – this ensued a series of dissatisfaction on Italy’s part not to mention the complexities to come. Restricting Milan’s competence was deemed unacceptable and the Italian Minister of Justice, Carlo Nordic claimed Italy shall “stand [its] ground”. Lorenzo Montanari, executive director of the Property Rights Alliance stated “transferring the responsibilities assigned to London to Paris or Munich is backtracking and undermin[es] Milan’s competency as a part of the Unified Patent Court, … Italy is currently ranked 2nd in Europe for brand protection and 9th for intellectual patent protection, which is essential in creating the appropriate environment for SPC pharmaceutical patents. ”
— Kluwer Patent Blogger (@KluwerBlogger) May 16, 2023
Establishing the division in Milan remained a priority and on 18 May 2023 the Italian Ministry of Foreign Affairs and International Cooperation released an official statement announcing Milan will be the third seat of the UPC, claiming arrangements will be submitted to the other UPC contracting states at the next Administrative Committee meeting. Based on the statement, Milan’s central division is expected to be up and running in a year’s time. However, the official release fails to address the fact that London competencies shall remain to be divided between Munich and Paris – Munich having claimed the chemistry and metallurgy sectors and Paris the pharmaceutical patents. Milan’s competencies are yet to be disclosed.
A source of stimulus
The UPC comes with a streamlined enforcement of patents that is wide ranging, and it is bound to make Europe more appealing against competitors, like China and America in launching innovative products, and hiking up European trade and investment. The discrepancies in the current European patent system in individual countries has thus far restricted the ebb and flow of patented inventions among EU countries. Most European patents are validated in only a few EU Member States to maintain low expenses. But the reconciled patent protection generated by the UPC shall positively impact trade and FDI flows in IP, particularly in the technology sector. Drawing on the research presented by the EPO, the “alignment of EU countries on the best existing standard of patent protection has the potential to generate a 2% increase (EUR 14.6 billion) in annual trade inflows and a 15% increase (EUR 1.8 billion) in annual FDI inflows in the EU.” In addition, expediting “cross-border technology transfers” and closer affiliations across Europe. The registry containing data and the legal status on transfers of Unitary Patents and licences paves way for a capable and effective market for technology transfer among members, making the market more inclusive – easing technology transfers and research and development also among countries where European patents have not yet been validated.
Once the embedding of this one-stop shop is ready, hopefully doubts shall be cast aside, and unitary patents spark prospective collaborations in trade and technology, making Europe a central IP hub. The system has all the attributes to garner success via its expansive network, and as EPO President António Campinos also claims, “… it will be a boon for the European economy as it establishes a uniform technology market facilitating transactions across a big economic region [and] this huge step represents a historic moment for innovators and the protection of inventions in Europe.”
This week, the EU's "Unified Patent Court" (UPC) was launched. However, patentees may temporarily opt out of the jurisdiction of the UPC altogether (instead subjecting themselves to national courts)
It turns out this opt-out ratio now could turn out to be "at least 50%, maybe…
— Pieter Cleppe (@pietercleppe) June 1, 2023